"Moody's": The banking system runs the risks of being affected by the European crisis

• Isărescu wants strong competition in the banking system

Banks are shifting onto consumers some of their own "flaws", since competition in the local system is weak, Mugur Isărescu, the governor of the NBR said yesterday, at the Romanian Banking Forum.

He said: "Shifting all kinds of bank costs onto the costs paid by their lenders, due to the imperfect competition existing on the market, will decline. How can banks afford to shift over to their customers, sometimes acting in a completely reckless manner, the costs of some of their flaws, in their internal organization or the inadequate assessment of risk? (...) It may be because competition is not strong enough and it is not influenced by the number of banks".

The governor of the NBR said that a competitive banking system does not necessarily mean more banks, but rather, it means stronger, healthier players, which have the ability to fight costs and to reduce the costs shifted over to their customers.

Mugur Isărescu warned that lenders transferred the costs of their non-performing loans to their customers, which are predominantly the result of a precarious analysis.

"From now on, in spite of the progress, it is clear that the financial banking system needs to strengthen competition", he said.

The statements of the governor came shortly after Nicolae Cinteză, the head of the Oversight division of the NBR, criticized banks for almost killing their customers through the way they restructured the loans of those who had troubled loans. On Saturday, Nicolae Cinteză said, at the EU-COFILE seminar, that the central bank will encourage the relaxation of the loan restructuring conditions for troubled borrowers, but who are sat least able to make a partial payment of the loans, and banks need to understand that their main assets are the customers.

• The Romanian banking system will be increasingly European

The governor of the NBR said that the Romanian financial system will get all the traits of the European system. Referring to the situation of Romania in the context of the new European agreement, he said that we will gain to an even greater extent, in the financial and banking system, the traits of the European system.

• Mihai Bogza: "The risks mentioned by Moody's are real, even if they are exaggerated to a certain extent"

The president of Bancpost, Mr. Mihai Bogza, said: "The risks mentioned by Moody's are real, even if they are exaggerated to a certain extent. They are potential risks and they could only become reality in the absence of measures for prevention and protection which the main protagonists concerned, namely the Romanian state and the banks themselves, could adopt - and it's precisely the fact that such measures were adopted over the last three years made Romania avoid experiencing those pessimistic scenarios presented in the past by certain analysts and rating agencies.

Furthermore, the Moody's report does not mention anything about the important advantages that Romania has, namely the fact that local banks have a capitalization far above the level required by the international norms and a significant liquidity reserve with the NBR, as well as the existence of the «precautionary» agreement concluded with the IMF and the very high level of the currency reserves at the NBR. Finally, another resource available to the Romanian authorities and the quick use of which could radically change the outlook for the Romanian economy for the better is the existence of the European grants allocated by the EU, of several billion Euros, which are still waiting to be used".

• • Rekkers: Banks with Romanian capital should represent 30% of the system

Robert Rekkers, the managing director of Banca Transilvania, said that the Romanian banking system showed a certain "resilience" in terms of solvency. He said: "Competition exists in the banking system, we are fighting for the good customers".

We think there is room for banks with Romanian capital. Banks with Romanian capital should account for at least 30%". (E.V.)

• • Petre Bunescu: If the economy grows, we shouldn't worry

Petre Bunescu, the managing director of BRD, said that if economic growth will continue there are no reasons for news such as the ones announced by "Moody's", concerning the fact that the Romanian banking system would be affected by the European crisis.

He said: "Our ratios are good. We will see how the economy goes. We hope it does OK. If economic growth continues I see no reasons to announce such concerning news, but in today's world you can expect anything". (E.V.)

• • Croitoru: Uncertainty in the Eurozone could lead to a slowdown in exports

Lucian Croitoru, advisor to the governor of the National Bank of Romania (NBR), considers that the information presented yesterday by ratings firm "Moody's", which claim that the Romanian banking system could be severely affected by the sovereign debt crisis in the Eurozone have been constantly thrown about.

He said: "Theoretically they are possible, but what matters is their magnitude, which will be influenced by the good fundamentals of the economy. Uncertainties in the Eurozone, which make a slowdown of the economic growth inevitable, even a potential recession, could indeed result in a slowdown of our exports and a potential weakening of the commitments of the parent banks in the Eurozone. This is the main mechanism by which the problems in the Eurozone are affecting the Romanian economy and which we have constantly emphasized".

The advisor to the governor of the NBR said that it should not be forgotten that Romania has good fundamentals: "Public debt as a percent of the GDP is very small, the budget deficit is shrinking, the structural budget deficit is relatively low, the current account deficit is less than 5%, and the reserves of the NBR cover seven, eight, months of imports, and the Romanian banking system is well capitalized, with CORE TIER 1 capital ratio of more than 13%". (ELENA VOINEA )

• Dragoş Cabat: Banks will have major issues attracting foreign currencies

Commercial banks present in Romania are forced to adapt to the still tense situation in the Eurozone and in particular to the needs of the parent banks to increase their capital in the near future, considers Dragoş Cabat, Managing Partner at efin.ro.

According to him, from the point of view of financing sources, banks will have major issues in attracting foreign currencies.

"That is why, we can expect the tightening of competition for sources in lei, and implicitly the raising of interest rates for deposits in lei and foreign currencies paid to depositors, as well as - I hope - the use of these innovative financing methods from commercial banks, which would use the equity market and the resources of investment and pension funds present on the market", said Dragoş Cabat, who added: "Lending will focus on the national currency, which will lead to lower interest on loans and implicitly will reduce profit margins for banks. On the interbank market, tensions will be felt to the extent that some banks will be downgraded by ratings firms and as a result, the exposure limits from market partners will fall. Banks facing a rating downgrade will have financing sources both from the external source (from parent banks) as well as from the domestic market (the interbank market), thus will raise the interest on deposits due to the increasing need for money, for the purpose of maintaining reasonable market share and turnover".

Lending to companies, which was the main source of revenues for banks in the coming year, will shrink if Romanian exports will be severely affected and the level of investments will be reduced, the quoted economist says. He considers that competition for the best customers present on the market will increase and SMEs and companies that have an unstable financial situation will continue to be neglected.

"As a result, banks will continue to keep expenses under control, and they will most likely not have profitability targets for the year 2012, but most like targets for maintaining the solvency and liquidity ratios above the minimal levels required by the legislation", said Mr. Cabat. According to him, the NBR can help banks through constant liquidity injections in the market and through lines of credit offered to them if needed. (A.A.)

• • Moody's: Ratings firms of the EU states need to be revised

According to ratings firm Moody's, the EU summit of December 8th offers very little measures and as such, does not change the growing threat to the cohesion of the Eurozone and of the future shocks which the Eurozone and the EU as a whole remain vulnerable to.

According to Moody's, the credit ratings of all the EU member states will need to be revised, if credit market conditions do not stabilize in the near future, and the summit does not change this outlook, as the agency expects to complete this repositioning in the first quarter of 2012.

According to Moody's, the press release of the EU, which includes additional measures to fight the crisis in the Eurozone, (which supports a deeper coordination between the states in the region in the coming years) reflects the persistent tension between the leaders of the zone, which puts at odds those who want stronger support for countries with heavy fiscal burden and the opposition of the powerful countries to provide such support.

Thus, in Moody's view, the crisis in the Eurozone continues to be at a critical stage, and the shocks which might occur, even in a "positive" scenario, have a negative implication on credit and rating, over the next months. (VLAD F. DUMEA)